Jacomb v Wikeley - [2013] NZHC 707

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2010-485-0997 [2013] NZHC 707

BETWEEN MICHAEL JOHN JACOMB, TRENE KATHLEEN JACOMB AND PETER REGINALD RICHARDSON Plaintiffs

ANDKENNETH DAVID WIKELEY Defendant

Hearing: 12-14 November 2012

Counsel: G J Toebes with J W G Grant for Plaintiffs
M J W Lenihan for Defendant

Judgment: 10 April 2013

JUDGMENT OF THE HON JUSTICE KÓS

[1] An economic misadventure in Chile by two former friends, now plaintiff and defendant in these proceedings.

[2] The defendant induced the plaintiffs to advance moneys to a New Zealand company with plans to mine molybdenum, copper and other minerals in Chile. The advances were characterised as loans, but not documented formally. The defendant provided personal guarantees as to 50 per cent of the plaintiffs’ exposure. The venture failed to prosper. The company failed to repay the advances. The plaintiffs now look to the defendant under his guarantees.

[3] The defendant says that, contrary to the correspondence at the time, the plaintiffs’ advances were subscriptions for capital in the mining company. Not loans. And he says that if they were loans after all, then most or all of the loans were unlawful and unenforceable. That is because they were major transactions in terms
of s 129 of the Companies Act 1993. Most of the lending was made without special

JACOMB & ORS v WIKELEY HC WN CIV 2010-485-0997 [10 April 2013]

resolutions in advance. The defendant says that subsequent resolutions approving the balance of the loans did not ratify the earlier lending.

Background

[4] The plaintiffs are trustees of the Genset Trust, settled in 1993. The trust had substantial cash reserves following the sale in 2004 of its 100 per cent interest in a large electrical engineering business. The trustee principally involved in the events leading up to this litigation was Mr Michael Jacomb.

[5] The defendant Mr Kenneth Wikeley is a businessman now resident in Melbourne. By his own admission he has had a chequered career. He was at one stage a one-third shareholder in the plaintiffs’ electrical engineering business. It was one among many interests in which he was involved in the 1980s and 90s. In 1990 he was in “severe financial trouble”, following the 1987 share market crash. He resold his shareholding to the plaintiffs (albeit for three or four times what he paid for it four years earlier).

[6] In 2006 Mr Wikeley induced Mr Jacomb to invest with him in a listed company called Plus SMS Limited. The investment initially appeared to prosper. However as Mr Wikeley put in evidence:

Unfortunately the company subsequently foundered. [Mr Jacomb] lost quite a lot of money as he had bought a significant number of shares in his own right aside from our deal.

Investment in OMG

[7] In September 2008 Mr Wikeley induced Mr Jacomb to invest in another venture. Orion Minerals Group Limited (OMG) was to be back-listed on the New Zealand Exchange through a company called RLV-3 Limited. OMG’s mining interests were in Chile. Mr…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Jacomb v Wikeley

Details

AGLC: Jacomb v Wikeley [2013] NZHC 707
Case: [2013] NZHC 707
Decision Date: 10 April 2013

CaseChat Overview and Summary

This proceeding concerned a mining investment in Chile which went awry. The plaintiffs alleged that the defendant induced them to lend US$1.5 million to a company called Edel Metals Group Limited (EMG). The defendant provided personal guarantees as to 50 per cent of the plaintiffs’ exposure. The venture failed to prosper. The company failed to repay the advances. The plaintiffs now look to the defendant under his guarantees. The defendant argued that the plaintiffs’ advances were subscriptions for capital in the mining company, not loans. And he said that if they were loans after all, then most or all of the loans were unlawful and unenforceable because they were major transactions within the meaning of s 129 of the Companies Act 1993. Most of the lending was made without special resolutions in advance. The defendant said that subsequent resolutions approving the balance of the loans did not ratify the earlier lending. The court held that the payments were loans, guaranteed to the extent of 50 per cent by the defendant, and that liability cannot be avoided on the basis either that the loans were unapproved or unratified major transactions. Judgment was given for the plaintiffs, subject to the equitable doctrine of marshalling and set off.

Orders